Chapter 1, Problem 1DQ

To determine

The opportunity cost and its relevance to economics.

Explanation of Solution

Since the opportunity cost is the next best alternatives, it is the given up benefit in order to obtain some other benefits.

Resources are scarcely available to satisfy the human needs. The reason is that the human needs are unlimited. The resources can be used for different purposes.

For example, Land is limited in availability and assumes that the land is used for cultivating of wheat and rice. If the land is used to cultivate wheat, then rice production has to been given up from that particular land. Thus, the scarcity of resource creates the opportunity cost. If available resources are enough to satisfy the human needs, then there is no opportunity cost.

The revenue generated from the land located at the center of New York City, is greater than the revenue generated from the land that located at suburb. If the mall is build, then it can generate more revenue than the revenue generated from the parking lot. At the same time, the revenue generating from the mall that located at suburb is lower than the mall located at centre of the New York City. Thus, the opportunity cost of building a parking lot at New York City is greater than the building a parking lot at suburb.

Economics Concept Introduction

Concept introduction:

Opportunity cost: Opportunity cost refers to the given up benefits in the process of obtaining some other benefit.